Protect SS, it's important

[jdw_fire]

I agree that removing the income cap largely eliminates the unfairness of the current system, however non working income would continue to be exempt.

as well it should be, SS is a wage replacement system not an income replacement system

 

[samclem]

as well it should be, SS is a wage replacement system not an income replacement system

Hey, I wish the SSA took this seriously, maybe they'd stop taxing my non-wage self-employed income!

 

[haha]

That perception is being reinforce by articles like the one I link to. What I'm concerned about is the undermining of SS so that the very people who most need it (those that don't plan) come to think of it as worthless and therefore don't bother to protect it.

I think that is the purpose of the articles. Like almost everything else in our modern media world, their purpose is mass manipulation.

Ha

 

[jdw_fire]

Hey, I wish the SSA took this seriously, maybe they'd stop taxing my non-wage self-employed income!

ahhh, come on, you must know that self employment income is a wage equivalent. (they both called earned income)

 

[kaneohe]

It can be negative, especially if we use real (i.e. including inflation effects) rate of return.

Here's a simple calculator you can use that shows rate of return. I'd have more faith in it if I could see their formulas/underlying spreadsheet.

Thanks....slick calculator. I got returns of 1-2% which is similar to what I
remember getting when I did it the hard way a while ago. l assume that's not the real rate of return.

 

[stoutboy]

1) eliminate the payroll tax cap (5% on all additional income above 100K per year would go straight into SS)

2) raise the minimum eligible age to receive benefits to 70 for everyone born later than 2000.

'Problem' solved.

 

[keegs]

the question is, if SS went away, would your income go up 6-7%? or whatever the effective increase would be.

my company adds that in as a benefit when trying to sell the "total compensation package" to naive college students. it's also a big fat minus in the pension calculation.

for eighty percent of us ss is the pension.

the system is being / has been undermined so that someone else can get a tax cut....it's as plain as the nose on your face.

marginal rates need to go up to pay back the IOUs and between now and 2040 we can figure out a way to adjust the system's future payouts.

....and with such mediocre results...why is it again that we're spending double what other industrialized countries spend on healthcare ?

 

[Emeritus]

as well it should be, SS is a wage replacement system not an income replacement system

For the earnings portion sure, but the welfare portion is distinctly not directly connected to taxes on wages. It sis simply status dependent

E.G. If I work 40 years and marry and divorce 3 spouses they all get a spouse benefit if we were married 1o years for which no taxes are paid

 

[Emeritus]

It can be negative, especially if we use real (i.e. including inflation effects) rate of return.

Here's a simple calculator you can use that shows rate of return. I'd have more faith in it if I could see their formulas/underlying spreadsheet.

It is probably reasonably correct as far as it goes. It is unclear it if includes spousal benefits. The text misstates the role and value of benefits for deceased workers but the calculation gives number in the right ball park. The reason for the poor rate of return for the upper SS income group (50-100,000) is the financing of the welfare component. You can see it most obviously by putting the same 200,000 income in and comparing single and dual earner couples. The single earner making 200000 does much better than the dual earning couple at the same level

 

[Emeritus]

1) eliminate the payroll tax cap (5% on all additional income above 100K per year would go straight into SS)

2) raise the minimum eligible age to receive benefits to 70 for everyone born later than 2000.

'Problem' solved.

Raising the age puts the cuts disproportionately on poor African Americans due to shorter life expectancies. Not to mention that the working ability of low income workers declines dramatically as they reach the middle and late 60s

 

[keegs]

E.G. If I work 40 years and marry and divorce 3 spouses they all get a spouse benefit if we were married 1o years for which no taxes are paid

They're eligable to a spousal benefit if each never contributed to the system.

 

[ronocnikral]

for eighty percent of us ss is the pension.

the system is being / has been undermined so that someone else can get a tax cut....it's as plain as the nose on your face.

marginal rates need to go up to pay back the IOUs and between now and 2040 we can figure out a way to adjust the system's future payouts.

....and with such mediocre results...why is it again that we're spending double what other industrialized countries spend on healthcare ?

don't worry about the mule, just load the wagon.

 

[ziggy29]

Raising the age puts the cuts disproportionately on poor African Americans due to shorter life expectancies. Not to mention that the working ability of low income workers declines dramatically as they reach the middle and late 60s

And makes the unemployment problem even worse.

 

[keegs]

don't worry about the mule, just load the wagon.

Ron...if you consider where the income distribution has gone in the past three - four decades then some might question who that mule is.

If fiscal dicipline is on your mind then we trippled the national debt in the eighties and doubled it again in the 2000's. Those fiscal policies put the "mule" before the cart.

But we both know with all honesty that fiscal prudence was never the objective here.

 

[Emeritus]

They're eligable to a spousal benefit if each never contributed to the system.

or if its bigger than what they would get from their own contribution. My point is that it is a social insurance benefit not tied to contributions so there is no reason to limit its funding source to payroll taxes on the middle class.

 

[nun]

The main point of my original post has been lost. There is s definite bias against thinking of SS as a critical part of retirement funding.
The article states

Workers have clearly gotten the message that they're largely on their own: Just-released numbers from Charles Schwab reveal that almost half of the general population say they do not plan on counting on Social Security as a source of income in retirement.

Why not write it like this

Workers have clearly gotten the message that SS is important to their retirement: Just-released numbers from Charles Schwab reveal that more than half of the general population say they plan on counting on Social Security as a source of income in retirement.

 

[ziggy29]

Why not write it like this

Because there is a strong downward trend in the level of trust that younger generations have that they won't get screwed by it relative to their elders. And the longer we take to deal with it, the more they will get screwed.

For that matter, why doesn't a newspaper report about the thousands of planes that landed safely in any given day instead of the one that crashed?

Having said all that, from a personally selfish point of view I'd be better off if they "kicked the can" a little longer, until I'm at least 50.

 

[Independent]

Well, then I don't agree with economists. The employers portion is a tax paid by employers. Which brings up the question - what is the reasoning for the employer and employee each paying half?

the question is, if SS went away, would your income go up 6-7%? or whatever the effective increase would be.

my company adds that in as a benefit when trying to sell the "total compensation package" to naive college students. it's also a big fat minus in the pension calculation.

I've done financial analysis for sales compensation in situations where sales people can be either employees or independent contractors. The IC's always got more cash per sale. I've sat in meetings with both types of people and gone down the list (with dollars and percents) showing why the company will pay more to the ICs. SS is right at the top because it's non-controversial.
Both types of sales people understand that the cost gets shifted to employees through lower cash comp.

I've also done cost/benefit on automating processes. We always include the company half of SS in the cost of employees. If employees want to beat out the machines, they need to accept wages that are lower than they would be if their were no company half of SS.

 

[Independent]

Thanks....slick calculator. I got returns of 1-2% which is similar to what I
remember getting when I did it the hard way a while ago. l assume that's not the real rate of return.

That probably is a real rate. I didn't see if they disclosed all the assumptions in their method, but 1-2% is common for current workers.

Remember that SS indexes your wages when they calculate your initial benefit, and then increases the benefit with CPI. So the easy calculation just assumes no inflation and produces a real rate.

 

[Independent]

The main point of my original post has been lost. There is s definite bias against thinking of SS as a critical part of retirement funding.
The article states

Why not write it like this

I have to agree somewhat with ziggy's observation that news stories rarely lead with good news. However, I also agree with the notion that "financial service" firms have a strong vested interest in convincing current workers that SS won't be there when they want it, so they just keep beating that drum.

The negative externality is that it's even harder to have a rational public policy discussion about the topic.

 

[keegs]

or if its bigger than what they would get from their own contribution. My point is that it is a social insurance benefit not tied to contributions so there is no reason to limit its funding source to payroll taxes on the middle class.

E,

There are many arguments like this that with all due respect are on the margins.

I'll admit I haven't thought this through but I don't even know that I agree FICA is a tax. SS is an old age annuity, funded through contributions paid by the employer and the employee much as a defined contribution 401k benefit. And for that reason I don't think SS should be funded through an income tax.

The SS benefit is determined by the individual contribution and an annual cost of living adjustment. If the program becomes underfunded for whatever reason, (e.g. demographic) then the administrators of the program should be expected to ajust the participant contributions accordingly. But again..we're good until 2037 or there abouts.

The decision to make the SS surplus available to the general fund has provided flexabilty to congress but the tax policies subsequent to that decision have become / are clearly a strategy to undermine the program.

 

[ziggy29]

I have to agree somewhat with ziggy's observation that news stories rarely lead with good news. However, I also agree with the notion that "financial service" firms have a strong vested interest in convincing current workers that SS won't be there when they want it, so they just keep beating that drum.

I certainly agree that Schwab and other firms have a vested interest in wanting to "scare" more people into investing more of their own money. But stories like this are just as commonly seen in mainstream media reports on financial matters.

 

[keegs]

I have to agree somewhat with ziggy's observation that news stories rarely lead with good news. However, I also agree with the notion that "financial service" firms have a strong vested interest in convincing current workers that SS won't be there when they want it, so they just keep beating that drum.

The negative externality is that it's even harder to have a rational public policy discussion about the topic.

Amen.

 

[ziggy29]

Well, here's the thing. We have two different somewhat opposing dynamics at work:

1. Convincing younger voters (say under 40) that continuing SS for the foreseeable future is a good thing for generations to come;

2. Knowing that *any* fiscally workable reforms to make SS solvent for many decades will, by necessity, make it a worse deal for younger generations while the older generations share little to none of the pain.

Frankly, other than an appeal to altruism or respect for elders, from a strictly economic standpoint I don't know why 20-somethings and 30-somethings would buy into it eagerly. Retirement is often such a foreign and far-out topic that they consider needs in the here and now more important, like being able to hold a job or generating enough income to live an acceptable lifestyle today. A few of us (myself included) were fortunate enough to be focused on retirement even in our 20s, but we are decidedly in the minority.

 

[nun]

I certainly agree that Schwab and other firms have a vested interest in wanting to "scare" more people into investing more of their own money. But stories like this are just as commonly seen in mainstream media reports on financial matters.

...and the media gets a lot of copy from those very firms. There is a constant drum beat against SS, if it wasn't for AARP I'd hear nothing positive about it. Seriously if we gut SS that will be the final barrier stopping
that majority of older people form either working until they die or living in poverty.